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Are you a manager or a leader?

COMMENTARY In politics as in business, the big temptation inherent in volatility is to fix the short term and forget the long term entirely. Solving long term problems usually incurs short term pain, and if you're after votes or hitting your earnings numbers, short term pain is the one thing you're eager to avoid. Many of our politicians aren't leaders at all; they follow opinion polls or appease the most strident commentators while lacking any vision that lasts past election day. The big problems we face - climate change, a growing population and, with it, increasing inequality - are issues for which they offer no strategic thinking at all.

The same challenge awaits business leaders the world over. Economic turmoil has forced many business executives to become highly tactical, by focusing on immediate revenue, cutting costs, reducing inventory, firing bad customers and seeking new markets. This is unavoidable since the first rule of business is to stay in the game. But what separates the leaders from the managers is the intellectual stamina and moral courage to do more than fiddle with the numbers.

Strategic Thinking

The hallmark of true leaders is their ability and willingness to do serious strategic thinking. This isn't the same as goal setting or coming out with emotional rhetoric. It is the ability to explore key questions:

1. What is happening in our market? What are the key trends, shifts and threats that we have to pay attention to? What will our sector look like in five, ten years? Where are the waves?

2. How do we respond to that change? What do we need to do, in terms of product, process, personnel and partnerships, to take advantage of it? How do we ride the wave?

3. What is getting in our way and how do we move it? Are these obstacles internal, and, if so, how do we need to remove them?

From what I see of most politicians currently, few can answer these questions with any degree of rigor. At most they'll say we need more jobs and then they'll have various ideological approaches to getting them. Nobody really believes they know. But the same is true in businesses: Few CEOs have a deeply engaged long view of their market (perhaps because CEO tenure is so short) and neither do they have a coherent response to that market. Instead, they're focused on pleasing the market by matching market expectations to the penny. While Wall Street applauds when they do so, to my mind it's a pretty sure sign that no strategic thinking is taking place.

Courage (not hope)

Of course it isn't enough just to do the strategic thinking; action must follow. In politics as in business, this means being prepared to hunker down and take some short term hits to achieve long term goals.

A classic example of this is detailed in Richard Rumelt's excellent book, Good Strategy/Bad Strategy. In 2008, General Motors's product line was a mess, featuring nine vehicles all clustered around the same $25,000 price point. In effect all of these cars were competing with each other in the same market segment. Someone should have cleaned this up, but no one did and GM declared bankruptcy in 2009.

By contrast, and at the same time, Toyota was already selling its hybrid, the Prius, which it had developed over the course of the preceding six years, in anticipation of rising fuel costs and an emerging market to which it could license its emerging technology. Make no mistake: That investment represented a significant short term cost - approximately $1 billion - but its long term value is still reaping rewards for a company with a far more coherent product line.

GM fundamentally had managers, executives who maintained the status quo, doing what had already been done, even after it became stupid. Toyota had leaders, executives prepared to choose and take risks.

Every psychologist will tell you that we all share an overwhelming bias in favor of the immediate. But that's why they study these things: So we can understand why and how we make bad mistakes and can learn from them. That takes time too.

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